Subsidizing Renewable Energy Under Capital Mobility

摘要: This paper provides a rationale for subsidizing green (renewable) energy production. Within multi-country model where is produced with mobile capital in and dirty production, we investigate the countries’ decentralized choice of emissions taxes subsidies. Without subsidies, tax set inefficiently low, since each country ignores environmental externality inflicted on other countries leads to outflow countries. When subsidy available, choose positive rate this reduces overall distortion tax-subsidy system. In doing so, internalizes larger part externality. As consequence relocated from into clean sectors global pollution. Hence, not only beneficial which imposes it but all